The rise and rise of dogecoin, the internet's hottest cryptocurrency

Forget about bitcoin. The latest go-to cryptocurrency is called dogecoin, a digital denomination that began life less than two months ago as a jokey tweet made by 26-year-old Australian Jackson Palmer.

But his joke has now taken on a life of its own. The total value of the market for dogecoin (pronounced dough-je coin) has just topped $US60 million ($68 million) and it has spawned a community comprising thousands of buyers, sellers, merchants, beggars, speculators and "miners", the people who mint the money.

Virtual economics: Jackson Palmer's jokey tweet took on a life of its own. Photo: Tony Walters

This week, transactions worth a total of $US14 million were made, including one Chinese investor who bought $US5 million worth of the virtual currency. And on a daily basis dogecoin transactions are outstripping those in the more established bitcoin market, albeit for a smaller overall value.

Mr Palmer, who is a product manager based in the Sydney office of the software company Adobe, is both amazed and elated by the experience of introducing so many newcomers to virtual economics.

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"If the world's got a problem at the moment, it's that people don't understand how economies operate, how scarcity works. And, if by joining the dogecoin community, they gain a better appreciation, then that's great."

To cap off a frenetic January, the community has also chipped in chipped in 27 million dogecoins - or $US30,000 - to help send the Jamaican bobsled team to compete at the upcoming Sochi Winter Olympic Games. (Based on exchange rates at the time of writing, one dogecoin is equal to $US0.0018.)

While there are still question marks about the long-term viability and security of these alternative currencies, associate professor David Glance from the University of Western Australia's Centre for Software Practice, for one, believes they have a big future - especially if they gain the backing of the official banking system.

"Ultimately, cryptocurrencies are no more crazy than shares in terms of investments," he says. "We can pretend that there is some logic behind valuations of shares but, in reality, most of it is just whim."

That's true virality. [Dogecoin] grew a mind of its own

Mr Palmer's co-conspirator is Billy Markus, a software developer at IBM, based in Portland, Oregon. They have never met in person. But, after coming across the joke website Mr Palmer cobbled together after the tweet, he suggested adapting a prototype virtual currency he had been toying with, which was based on the bitcoin DNA.

At this stage, you may think that here are two smart alecs who have just invented and launched a virtual currency, so surely they must have helped themselves to a vault full of coins before opening for business.

Yes, they wrote the algorithms that manage the currency and set a market capitalisation limit of 100 billion.

But on December 8, 2013, when dogecoin launched, they effectively lost control. Now the dogecoin market has become a networked, self-regulating, peer-to-peer community.

These computer-generated currencies are produced through an activity known as mining where computers are used to process and solve mathematical puzzles and equations.

As the currency pool grows and heads towards its capped limit, more computational power is required putting the activity outside the reach of amateurs using standard equipment. Eventually, this activity is dominated by miners using supercomputers or banks of networked computer known as server farms.

But that was not an issue for the founders. Mr Palmer says he and Mr Markus never intended that dogecoin get too serious or appeal to the spivs and get-rich-quick types who have gravitated more towards the bitcoin micro-economy.

In part, this is due to the large following dogecoin enjoys among users of reddit, a popular website known for its diverse and socially active community.

This is undoubtedly because dogecoin takes both its name and mascot from one of last year's most viral internet memes - or running jokes.

The doge meme takes its name from a reference on an episode of a popular 1990s internet cartoon series called Homestar Runner. The term "doge" was revived, mashed-up with a quirky photo of a pet Shiba Inu dog and then sprinkled with a few ungrammatical phrases written in the much-maligned comic sans font. Last year, it exploded across the internet.

Mr Palmer, who was born and raised in Gosford on the NSW central coast, believes the doge theme has helped to make this cryptocurrency market appear less menacing, more accessible and a place in which he hopes philanthropists will outnumber the profiteers.

"What I'd really like to see is for dogecoin to become the default tipping currency of the internet."